Many people in Taiwan fear China could use its economic might to influence the island politically. The opposition Democratic Progressive Party said it will to push for a referendum on the trade deal with the mainland. "Taiwan is losing its economic autonomy and is likely to become another Hong Kong," said Chiu Tai-san, a former legislator with the Democratic Progressive Party and previous vice chairman of the Mainland Affairs Council, which overseas Taiwan's China policy. Hong Kong, a former British colony, reverted to Chinese rule in 1997 and has increasingly found prosperity as a service and logistics center for the Chinese economy.Reading between the lines, it is easy to see where most of the benefits from Chinese investment will fall: Taipei, the island's finance and real estate center. The government does not appear to be making any effort to spread the wealth. Given that the avowed purpose of Chinese investment is to annex the island, concentrating it in Taipei simply places the investment in an area already fervently pro-KMT -- essentially wasting its hearts-and-minds effect. Good.
But foreign businesses -- whose investment in Taiwan has been declining in recent years -- are welcoming the trend. Normalization "is upgrading Taiwan's economic strategic position," says Jerry Fong, an official with the European Chamber of Commerce Taipei.
One focal point of Chinese investment has been the Taipei 101 office tower, which when it opened five years ago was the world's tallest building. Built to be an icon of Taiwan's progress, the 509-meter jade-color tower was largely a white elephant, with almost half of its office space empty. Now representatives from major Chinese companies such as Lenovo Group Ltd., Sinosteel Corp., and Tiens Group Co. occupy the high-profile address. The building is now 80% occupied.
Anticipation of more Chinese renters has helped lift average rental rates in the area around Taipei 101 by 5% to 10%, says King Chiao, president of Hsin-Yuan Business Rehouse Co., a Taipei office brokerage.
The tower's shopping areas are now busy with shoppers from across mainland China. In the first six months of this year, the number of visitors to Taipei 101's observation deck rose 30% from a year earlier, almost all because of Chinese tourists, says Michael Liu, a spokesman for the building.
Beijing has been eager to use its economic clout to woo the island's population. China claims Taiwan as part of its rightful territory and aims to eventually bring it under Chinese control. Chinese President Hu Jintao has publicly encouraged Chinese enterprises to invest in Taiwan.
Going on behind the scenes, a staffer at a local law office said to me the other day, is a constant and dizzying flow of revised and new regulations aimed at facilitating Chinese residence and economic activities, with little public oversight or discussion. Indeed, the changes are so rapid, broad, and numerous, that they are impossible to keep track of. Taiwan is undergoing fundamental, probably irreversible change, that is being kept out of the public eye.
192 industries were opened on June 30th:
The 50% restriction is probably pure fig leaf. Recall that the pro-KMT TVBS television news channel was/is 100% owned by Hong Kong Chinese, half legally up to the 50% limit, the other half through a dummy corporation located in the Caribbean. It is difficult to imagine that these limits will be adhered to by Chinese investors or enforced by our Chinese nationalist ideologue president and his Chinese nationalist party.
John Deng, deputy minister of the MOEA, pointed out that mainland companies can begin applying immediately to the ministry for the establishment of subsidiaries or branches on the island. They can also set up subsidiaries in Taiwan through a third region.
In the manufacturing industry, automobile, motorcycle, rubber, plastics and textile companies can now receive Chinese investment money, as can companies in computer peripherals, home appliances and passive electronic components sectors. However, herbal, construction, liquid crystal display panel and wafer foundry companies remain off-limits to mainland investment.
As for the service industry, retailers and wholesalers of daily necessities will be permitted entry, as will aviation and shipping enterprises. Mainland companies can invest in type II telecommunications businesses, but maximum ownership is limited to no more than 50 percent.
Mainland investors will be allowed to invest in infrastructure projects, but are prohibited from bidding for construction contracts. Investment in civil aviation terminals and facilities is limited to public areas such as aviation halls, boarding and luggage areas, and other non-restricted areas. Ownership of aviation terminals and ports will also be limited to no more than 50 percent. The minimum requirement for investment in ports is set at a range between NT$1 billion (US$30 million) and NT$2.5 billion.
Military-related mainland enterprises are prohibited from investing in the island. In addition, mainland enterprises are not allowed to invest in monopolies or in businesses that could affect national security. Enterprises with capital in excess of NT$80 million, and which have received investment money from the mainland, will have to file annual financial statements.
In addition to permitting investment from China in dozens of industries, the government is also loosening restrictions on cross-strait remittances:
The Financial Supervisory Commission under the Executive Yuan announced June 30 that effective immediately, individuals or businesses remitting money to the mainland are not restricted to providing financial assistance or donations to friends and relatives. Instead, remittances will be regulated by negative listings, so that any purpose that the government has not prohibited will be allowed.So... investment flows from China, increased remittances -- the finance industry is going to be awash in cash.
According to FSC statistics, cross-trait remittances (outward plus inward remittances) passed NT$10 trillion for the first time in 2008. Over the past four years, the annual increase has averaged 34 percent. An official with a large-scale remitting bank predicts that with the great loosening of transfer restrictions, there could be a more than 50 percent increase this year, which means that cross-strait remittances could approach NT$15 trillion, more than Taiwan’s yearly gross domestic product.
The government also announced today that Taipei and Beijing have reached preliminary agreements on ECFA:
Things are moving very rapidly....
The entire agreement is less than 10 pages in length, and covers such general topics as the lowering and abolishing of tariffs, trade in services, trade in goods, mechanisms for solving disputes, and an appendix detailing tariff-free sectors, Huang said.
The two sides have finished studying the preliminary agreements and have started a further round of negotiations, he added.
The director-general made his remarks in Taipei while attending an industry forum in a summit between business leaders from Taipei and Beijing. He was asked to give a report on the possible content and strategies to promote a cross-strait economic cooperation framework.
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